Steel Tariffs After Imposing Tariffs

Steel Tariffs

After imposing tariffs on foreign steel imports, U.S. President George W. Bush faced such a severe backlash from both foreign and domestic sources that he was finally forced to repeal them. Initially the tariffs were imposed in order to appease the U.S. steel industry, which complained that heavily subsidized foreign competitors had an unfair advantage over them in the market. Until tariffs were imposed U.S. steel manufacturers were experiencing a long-suffering economic decline; this resulted in several producers filing for bankruptcy and steelworkers getting laid off. Certain states in particular such as Ohio, West Virginia, and Pennsylvania, were especially hit hard by the steel industry's economic crisis ("Q&a: U.S.-EU Steel Dispute," Dec. 4, 2003).

In response to this predicament the Bush administration imposed tariffs of up to 30% on a variety of steel imports beginning in March 2002 ("Q&a: U.S.-EU Steel Dispute," Dec. 4, 2003). The administration claimed that the tariffs would alleviate the "material injury" that steel imports were supposedly causing domestic producers. Many have speculated however that the actual reason behind the tariffs was political in nature; Bush wanted the support of states hit hardest by the steel crisis in his 2004 bid for re-election. The tariffs resulted in the significant decrease of imports and in the higher price of steel, which greatly benefited domestic manufacturers.

Europe, having been most greatly affected by the tariffs, filed a complaint with the WTO. The trade body effectively ruled that the U.S. was applying its steel tariffs illegally under world trade rules. It also ruled that the EU and other affected countries could impose retaliatory tariffs equal in damage to what the U.S. was inflicting through its duties ("Q&a: U.S.-EU Steel Dispute," Dec. 4, 2003). The EU subsequently threatened to impose its own duties if the U.S. failed to repeal the steel tariffs by mid-December 2003. The Bush administration promptly repealed them after this threat.

If the retaliatory tariffs had gone through, they would have affected up to $2.2 billion dollars worth of goods from the U.S. ("EU slaps $200m tariff on U.S. imports," Nov. 5, 2003). They could have ranged from being between 8% and 30% and would have been applied on a wide variety of American goods ("Q&a: U.S.-EU Steel Dispute," Dec. 4, 2003). The exports potentially being affected ranged from Harley Davidson motorcycles to citrus fruit ("EU slaps $200m tariff on U.S. imports," Nov. 5, 2003).

The basis upon which the EU selected goods to impose duties on was the political damage they would cause Bush during his 2004 re-election bid. The majority of affected goods were produced in states that were vital to Bush's success in the election. They included the southern U.S. where items such as citrus fruits, clothing, shoes, tobacco, rice, yachts, paper, and cardboard were produced. They also included many states in the Midwest, where watches, spectacles, hand tools, and steel products were produced (Q&a: U.S.-EU Steel Dispute," Dec. 4, 2003).